Singapore Tightens Foreign Worker Rules After Poll Backlash

Officials are working to resolve crowded transportation and a shortage of public housing even as those issues will take time, said Singapore's prime minister Lee Hsien Loong. Photographer: Charles Pertwee/Bloomberg

Aug. 15 (Bloomberg) -- Singapore Prime Minister Lee Hsien
Loong will expand public housing and medical benefits and
tighten curbs on foreign workers, after a backlash over the cost
of living led to record opposition gains in the May elections.

The government will raise salary thresholds and require
better educational qualifications for some foreign workers, Lee
said in a televised speech late yesterday, stressing the nation
needs to ensure policy adjustments don’t hurt Singapore’s
attractiveness to investors.

“We can keep the thrust of our policies but adjust them to
deal with specific problems,” Lee, 59, said in the annual
National Day rally speech, the first major policy address since
a May 7 election. “Let’s not throw out the baby with the
bathwater. It’s very dangerous.”

Lee’s ruling People’s Action Party won this year’s general
election with the smallest margin of popular votes since
independence as citizens expressed discontent over rising costs
and competition with foreigners for jobs and housing. He has
pledged to be more responsive to criticism of government
policies and unveiled measures yesterday to widen the social
safety net for elderly and lower-income Singaporeans.

“The issues that are close to the people’s hearts and were
big agenda items during the election, such as housing, got an
airing and voters will want to look for a continued attitude of
being more consultative and open to feedback,” said Selena Ling,
head of treasury research at Oversea-Chinese Banking Corp. in
Singapore. “For investors, the message is that Singapore
remains open for business as usual.”

Easiest Place

The Singapore dollar rose 0.4 percent to S$1.2068 against
the U.S. currency as of 1:11 p.m. local time today. Singapore’s
benchmark Straits Times stock index rose 0.7 percent, set for a
second day of gains.

Singapore, ranked by the World Bank as the easiest place to
do business, has cut taxes in recent years to spur investment,
prompting companies to hire hundreds of thousands of foreigners
to fill positions. The island was among the top 20 destinations
for international investment last year, according to the United
Nations Conference on Trade and Development.

“After the general election, investors have been watching
us very closely and they’ve asked us directly whether Singapore
is changing course fundamentally,” Lee said. “We are
determined to keep our strengths. We will maintain the policies
which are important for us and therefore useful for them.”

Foreign Presence

More than a third of Singapore’s 5.1 million population is
made up of foreigners and permanent residents. Companies added
about 116,000 jobs last year, and 59,700 of the new positions
created went to foreigners, according to the Ministry of
Manpower.

The government has made it more expensive for companies to
hire foreign workers by raising levies, and it tightened the
inflow of immigrants last year. Opposition leaders have urged
more measures to rein in property prices and temper immigration,
which they said damped wage gains among lower-skilled workers.

Singaporeans will remain the core of the island’s workforce,
unlike the Gulf states in the Middle East, where foreigners make
up the majority, Lee said yesterday. The government will raise
salary thresholds and tighten educational qualifications for the
so-called middle range of foreign workers, he said. He didn’t
give details, saying the manpower ministry will give more
information later.

Growth Forecast

“We have to accept that if we bring down the number of
foreigners, slow the inflow, it means slower growth,” Lee said.
“Companies will come here not so vigorously or they may choose
to expand elsewhere and we will have less resources to improve
our lives.”

Inflationary pressures are rising in the nation even as
growth slows from a record 14.5 percent pace in 2010. The
Southeast Asian nation’s gross domestic product will probably
rise 5 percent to 6 percent this year, Lee said earlier this
month. Retail sales growth from a year earlier accelerated to
10.9 percent in June, a report showed today.

There is a possibility of another world recession should
conditions in the U.S. and Europe deteriorate, and emerging
markets including China and India will be vulnerable to the
global slowdown, Lee said. Singapore needs long-term policies to
keep the economy expanding, he said, without elaborating.

Singapore’s ruling party, co-founded by Lee’s father Lee
Kuan Yew and in power since independence in 1965, won 81 out of
87 parliamentary seats and 60.1 percent of the vote on May 7,
compared with about 67 percent in the 2006 election. Lee has
said his government will change the way it rules after the
opposition won a record number of seats.

Housing Measures

Officials are working to resolve crowded transportation and
a shortage of public housing even as those issues will take time,
he said. Before the election, the government pledged to build
more homes and review the income ceiling for families seeking to
buy new units from the state housing authority. That would allow
more people to buy directly from the Housing & Development Board
instead of through the more expensive resale market.

The income ceiling will be raised to S$10,000 ($8,288) from
S$8,000, Lee said yesterday. The housing board will construct an
additional 25,000 homes under the so-called Build-to-Order
program next year, he said.

“We will keep housing available and affordable for
Singaporeans,” Lee said.

Local universities will increase the intake of Singaporean
students by 2,000 over the next four years and cap foreign
enrollment at current levels, he said.